This is a summary of links featured on Quantocracy on Saturday, 12/09/2023. To see our most recent links, visit the Quant Mashup. Read on readers!
-
Adaptive Asset Allocation Replication [Foss Trading]The paper, Adaptive Asset Allocation: A Primer by Adam Butler, Mike Philbrick, Rodrigo Gordillo, and David Varadi addresses flaws in the traditional application of Modern Portfolio Theory related to Strategic Asset Allocation. It shows that estimating return and (co)variance parameters over shorter time horizons are superior to estimates over long-term horizons because parameter estimates
-
The Art and Science of Trading Carry [Robot Wealth]Lets talk about carry trades. First, what exactly is a carry trade? A carry trade is a trade that pays you to hold it. A position where, if nothing changes except the passing of time, you expect to make money. Lets go through some examples. FX carry The classic example is the FX carry trade, where you borrow a low-yielding currency to buy a high-yielding one and profit from the interest
-
Diseconomies of Scale in Investing [Alpha Architect]Abstract: One of the problems for investment funds is that success contains the seeds of destruction as cash inflows follow outperformance. In his seminal 2005 paper, Five Myths of Active Portfolio Management, Jonathan Berk suggested asking, Who gets money to manage? He answered that since investors have access to databases that provide returns histories, and everyone wants to have